Less Than Expected Fall In Employment Has Brought Some Relief To The Us Economy

Under usual circumstances, growth in employment would bring reason to cheer

. But in the case of the US economy, which is still reeling under the impact of recession, a less than expected fall in employment has brought some relief to the US economy. The latest numbers released by the US labor department suggest that the fall in employment for a third consecutive month in August was far less than expected. Moreover, private hiring grew, suggesting that industry was more confident of expected demand, which may be treated as a positive sign of recovery.

Jobs fell in the government sector as non-farm payrolls fell 54000, while the private sector added 67000 jobs. Overall the unemployment rate rose to 9.6% in August from 9.5% in the previous month. Employment at automobile factories, which had risen by 22000 in July, fell by approximately the same in August. At the same time, retail sales and the housing markets continued to display weakness. Thus, the data on the US economy is not giving any clear signal, but giving out mixed signals about its state.

While the dollar rose a bit on this news, there does not seem to be any sustainable basis for an economic performance based dollar recovery. Though, the news on the employment front may be better than what was expected and may provide a temporary respite from the possibility of a double dip recession, a very clear trend is yet to be formed. The growth in the number of jobs of 61000 in June, 107000 in July and 67000 in August may indicate a far better trend than when the US was losing over 750000 jobs a month, but is still not enough to absorb the number of Americans entering the workforce. The US economy needs to churn out nearly 125000 to 150000 new jobs every month to absorb Americans joining the workforce. Most of these new jobs need to come from the private sector to make economic recovery and growth a sustainable process.

The slow pace of growth in employment has brought into focus the efficacy of the government stimulus programs and raised questions, if the stimulus money has been spent effectively. The US government claims that the stimulus packages targeted towards creating jobs have led to the creation of nearly 640000 new jobs. The cost of such stimulus has been pegged at nearly $ 275 billion, implying that each new job created has cost the US tax payer nearly $ 429000. These figures suggest that the tax payer's money has gone down the pipe as analysts believe that if the stimulus money was used effectively by the private sector, nearly 5.5 million new jobs could have been created.

Given, the backdrop of the US economy giving mixed signals on the recovery front, the government could think of another round of fiscal stimulus for reinvigorating the US economy. However, the poor results of the first round of fiscal stimulus suggests that any more good money wasted could burden future generation of Americans with immense amount of debt and weigh heavily on its progress. In any case as of now, it is unclear as to which way the US is headed as the economic figures are only relaying a very mixed message.

by: Cedric Welsch

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